LLQP Segregated Funds & Annuities · Component 2.2 · 30% of the exam
A client who is already insolvent transfers savings into a segregated fund and names his spouse as beneficiary, hoping to defeat his creditors. The agent should understand that:
- Athe transfer is fully protected because a family class beneficiary has now been named
- Bcreditor protection applies automatically to every segregated fund deposit without exception
- Cprotection begins the moment the application is signed, regardless of the client's circumstances
- a transfer made to defeat known creditors can be set aside by a court
Correct answer: D) a transfer made to defeat known creditors can be set aside by a court
Creditor protection depends on the beneficiary designation and on the client's intent at the time of the deposit. A court can reverse a transfer made when the client was insolvent or was deliberately placing assets beyond a creditor's reach.
Why the other options are wrong
- AA family class designation helps, but it cannot cure a transfer made in bad faith.
- BProtection is not automatic; it depends on the designation and on the circumstances.
- CSigning an application does not shield assets moved to escape existing creditors.
Exam tip
Creditor protection requires both the right designation and a deposit made in good faith.
Common mistake
Promising creditor protection to a client who is already in financial difficulty.
What this tests
CISRO competency component 2.2 — Analyze the available products that meet the client's needs — which is weighted at 30% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 2
- A segregated fund's 'guaranteed amount' after a partial withdrawal under proportional reduction is:
- A distinctive estate advantage of a segregated fund over a non-registered mutual fund held jointly with a child is:
- Segregated fund guarantees are most valuable relative to their cost when:
- A segregated fund's annual statement reports:
- Compared with a segregated fund, an exchange-traded fund (ETF) generally offers:
- A segregated fund's 'automatic death benefit reset' feature:
Practice the whole Segregated Funds & Annuities module
Timed sets weighted like the exam, and review of every question you miss. Free to start.